Net2TV Brings TV's Traditional Business Model to Its Web Video Service

Service to Add Interstitial Ads, Roll Out to Roku

Startup Net2TV provides a free TV service by knitting together web video from sources like CBS Interactive's Chow.com and Discovery's Revision3 to create a sit-back, TV-like viewing experience. Now it's also borrowing old TV's business model: the 30-second commercial break.

"Using those video elements as building blocks, we create a show that creates commercial breaks," said Net2TV's senior-VP Jim Monroe.

Launched in December, Net2TV's Portico TV service is available on Philips smart TVs and soon Roku boxes.

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Starting next month the company will start targeting users with six commercial breaks an hour of programming and a maximum of two ads per break. Unlike YouTube, viewers won't have the option to skip ads, but they won't be bogged down waiting for the ads to play before getting back to whatever they were watching.

Because Portico is cloud-based, the service is able to dynamically insert advertisers' spots so that they load with a show as opposed to buffering when viewers hit the commercial break, explained Net2TV founder and CEO Tom Morgan. Adobe has similarly promised to cut out the loading lag with its Primetime video-streaming platform.

Advertisers can also target their ads according to information viewers submit when registering for the service such as their age, gender and zip codes. And brands can add calls to action like links to more product information that people can click on and will pause whatever show they were watching.

Bigger content partners with in-house ad sales organizations like CBS Interactive will be responsible for selling the ads, but Net2TV will play the part for those without sales teams, Mr. Morgan said. For the larger partners managing their own ad sales, Net2TV will simply act as a content distributor and not take a revenue cut, and the sales teams will be able to bundle Portico buys with standard TV campaigns.

However when Net2TV handles sales, it will receive a cut negotiated with the individual partner that Morgan said would be "comparable" to YouTube's typical 45% take. The company wants to avoid selling inventory via ad networks, Mr. Morgan said. "We want to be part of the television fabric, not a commoditized part of display," he said.

Mr. Morgan wouldn't specify how many people user Portico and how long they typically spend watching video through the service, but said the company's goal is to reach 20 million screens by the end of the year. To date Portico is only available on certain Philips smart TVs, but next month it will roll out to more than 5 million Roku players and soon tablets through a not-yet-announced partnership. "We have a series of announcements in the hopper that lead us to believe we will meet or exceed [the 20-million screen] goal by the end of the year," he said.

The Roku deal should be of interest to marketers because of the number of users that don't subscribe to traditional cable TV. Mr. Morgan wouldn't say how many Roku users don't subscribe to a traditional paid TV service, but described it as a "reasonable amount." Assuming that set of users check out Portico, the service will "help [advertisers] reach that hard-to-reach audience with a standard TV campaign."

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Tim Peterson

Tim Peterson covers digital media for Advertising Age out of the publication's Los Angeles bureau. He previously reported on social media and ad tech for Adweek and worked as a reporter handling the digital marketing beat at Direct Marketing News.